Cliffs Natural Resources (NYSE:CLF) has struggled recently as the global macroeconomic conditions haven't heated up as investors expected and weak Q1 results. However, investors may be getting ahead of themselves selling the stock as stock is undervalued by all valuation metrics and the long term outlook looks strong.

In its Q1 release, Cliffs said that it expects the drivers affecting global steel demand to remain intact. In China, Cliffs anticipates GDP growth targets to support annual crude steel production of approximately 730 million tons, maintaining a healthy demand for its Eastern Canadian Iron Ore and Asia Pacific Iron Ore businesses. The Company continues to anticipate modest growth in the U.S. economy, which is expected to result in steady end markets for Cliffs' customers. Given these expectations, Cliffs anticipates an average 2012 spot price for 62% Fe seaborne iron ore of approximately $150 per ton, a price serving as the basis for the iron ore business outlook below. Below is an in depth look at the valuation metrics and stock chart.

Valuation: Cliffs Natural Resources' trailing 5 year valuation metrics suggest that the stock is undervalued as all of the metrics are below their respective 5 year averages. Cliffs Natural Resources' current P/B ratio is 1.3 and it has averaged 2.7 over the past 5 years with a high of 6.6 and low of 1.1. Cliffs Natural Resources' current P/S ratio is 1.2 and it has averaged 1.9 over the past 5 years with a high of 3.7 and low of 0.6. Cliffs Natural Resources' current P/E ratio is 5.1 and it has averaged 14.2 over the past 5 years with a high of 31.3 and low of 3.7.

Price Target: The consensus price target for the analysts who follow Cliffs Natural Resources is $91. That is upside of 61% from today's stock price of $56.46 and suggests that the stock is undervalued at these levels. This also suggests that the stock has significant upside and is an attractive opportunity at these levels.

Forward Valuation: Cliffs Natural Resources is currently trading at about $56 a share with analysts expecting EPS of $10.84 next year, an earnings increase of 27% y/y, for a forward P/E ratio of 5.2. Taking a look at the company's publicly traded comparisons will give us a better idea of the stock's relative valuation. CONSOL Energy (NYSE:CNX) is currently trading at about $35 a share with analysts expecting EPS of $2.43 next year, an earnings increase of 37% y/y, for a forward P/E ratio of 14.2. Peabody Energy (BTU) is currently trading at about $29 a share with analysts expecting EPS of $3.62 next year, an earnings increase of 36% y/y, for a forward P/E ratio of 8. Arch Coal (ACI) is currently trading at about $8 a share with analysts expecting EPS of $0.14 next year for a forward P/E ratio of 59.3. The mean forward P/E of Cliffs Natural Resources' competitors is 27.2 which suggests that Cliffs Natural Resources is undervalued relative to its publicly traded competitors.

Earnings Estimates: Cliffs Natural Resources has beat EPS estimates 1 times in the past 4 quarters. The company's EPS figures have come in between -79 cents and 39 cents from consensus estimates or about -22.7% to 10.6% from analyst estimates. The company has reported earnings that have differed from analyst estimates by a wide margin which suggests that the stock may experience upside from earnings surprises.

Price Action: Cliffs Natural Resources is down 35.2% over the past year, underperforming the S&P 500, which is up 3.3%. Looking at the technicals, the stock is currently below its 50 day moving average, which sits at $65.57 and below its 200 day moving average, which sits at $67.56.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.